Do you know how to lose everything as you try to gain in Forex?

Have you ever thought about the strategy which you are using may cause you to loose everything? Maybe you are using the worst strategy. The worst strategy in FOREX market is known as averaging down which means buying more shares that you had previously acquired, as the price drops. Traders often purchase shares this way in an effort to reduce their initial entry price.

Only bad investors average down by buying shares of a sinking assests to decrease their overall average price per share. This strategy is like throwing good money after bad. This increases tho loss of investor’s loss if the share keeps dropping. Remember, just because a share is cheap now that doesn`t mean it`s not going to get any cheaper. The best way to make it clear is exemplify. For instance you bought one thousand share at 40$. The novice investor may not have a stop loss in place, and the share price falls to $30 dollars. Here comes the stupidity of this Forex trading strategy — to average down the novice trader might by another thousand shares at $30 to lower the average cost per share that he`d already purchased. So, his average cost per share would now be $35.

Unfortunately, the share price may fall even further, and the novice trader will again buy more shares to reduce the average cost per share. They end up buying more and more into a share that`s losing their money.

Now, imagine this Forex trading strategy being applied to a portfolio of assets. In the end, all the capital will automatically be allocated to the worse performing assets in the portfolio while the best performing assets are sold off. The result is, at best, a disastrous underperformance versus the market.

If a trader uses an averaging down system and uses margins, their losses will be magnified even further. The biggest problem with this Forex trading strategy is that a trader`s gains are cut short, and the losers are left to run. My advice is — never average down. The process of buying a share, watching it fall, and then throwing more money at it in the hopes that you`ll either get back to break even or make a bigger killing is one of the most misguided pieces of advice on Wall Street. Never be faced with a situation where you`ll ask yourself, Should I risk even more than I originally intended in a desperate attempt to lower my cost and save my butt?`

Instead of using averaging down, design a simple robust system with good money management rules. Practically the results will be better than averaging down for sure.